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The Coming Pandemic

By Michael Friedenberg

May 15, 2006 — CIO —

As the world tries to ready itself for the inevitable spread of the H5N1 avian flu virus, it’s unsettling to see another pandemic creeping up on us for which we seem frighteningly unprepared. I’m referring to identity theft and to the fact that companies are simply not taking sufficient care to protect their most important asset: their customers.

The numbers are already staggering, and they will only get worse. At the recent CSO Perspectives Conference, hosted by CIO’s sister publication, David McIntyre, CEO of TriWest, reported that 53 million identities have been stolen to date and 19,000 more are stolen every day. When it comes to cleaning up this mess, companies on average spend 1,600 work hours per incident at a cost of $40,000 to $92,000 per victim.

But what’s even more expensive than the cleanup is the cost to customer relations. According to Edward McNicholas, a partner in the law firm Sidley Austin, if you experience a security breach, 20 percent of your affected customer base will no longer do business with you, 40 percent will consider ending the relationship, and 5 percent will be hiring lawyers!

Business continues to profit from the information it gathers about its customers, using IT to leverage that data to create more efficient sales strategies and more opportunities for doing business. But with this profit comes risk. ChoicePoint and BJ’s Wholesale have become poster children for what happens if an enterprise is not sufficiently careful with the information it collects. Can you afford a $15 million fine such as the one the Federal Trade Commission levied in January on ChoicePoint? Can you afford any breach of confidence with your customers?

These questions are obviously rhetorical. No company wants to place customers in harm’s way or risk its relationship with them. What’s not a rhetorical question is, “Are you doing all you can to make sure that this does not happen to your organization? And, if it does, do you have a plan in place to deal with it?” Unless business brings all its energy and resources to bear on this growing problem, we risk a pandemic that will rock the buyer-seller relationship to its core.

Let me know what you’re doing to inoculate your enterprise.

© 2008 CXO Media Inc.

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